The NUA Conundrum: Why One IRA Rollover Can Turn Tax Breaks into Ordinary Income For many employees of companies offering stock based retirement plans, net unrealized appreciation (NUA) is a familiar and welcome tax rule.
It allows them to defer paying taxes on a significant portion of their employer stock's value until they sell it. However, this benefit can be lost if not managed carefully.
Consider a retiree with an employee stock ownership plan (ESOP) account valued at $400,000, with a cost basis of just $80,000. This means the stock has appreciated by $320,000 since it was contributed to the plan.